R&D Tax Incentive - What is in it for advanced manufacturing? 30 th March 2016 Dr Greg Thomas Assistant State Manager AusIndustry - Business Services

Programme Overview A broad-based, market-driven, self assessment program. An entitlement program – not a grant. Controlled by legislation*. Aimed at encouraging more businesses to carry out R&D. Generous support, especially for small and medium-sized firms. Jointly administered by AusIndustry and ATO. * Industry Research and Development Act 1986 (Cth) Division 355 – Income Tax Assessment Act 1997 (Cth) R&D Tax Incentive

Benefits Turnover of less than $20m turnover 45% refundable tax offset. Turnover of equal or greater than $20m turnover 40% non-refundable tax offset. Effective as of 1 July 2014, a $100m threshold applies to R&D expenditure R&D Tax Incentive

R&D Tax Incentive – who’s accessing the programme From a business perspective: –More than 13,600 companies* registered for income year. –Registrations up 14.6% year-on-year; number of companies up 17.7%. –Around 3,300 (24.3 %) new customers - up 10% up year-on-year. –Over 850 Advance/Overseas finding applications received to date. –Over 190 registered Research Service Providers (RSPs). –Total government support ~$2.97 billion in (Science, Research and Innovation Budget Tables, Sep 2014). Programme Demographics (National) source: Department of Industry and Science (income year , as at 31 December 2014) * for the R&D Tax Incentive, this includes R&D-performing subsidiaries of groups that are consolidated for tax purposes

R&D Tax Incentive – who’s accessing the programme Western Australia’s participation: –More than 1,800 companies* registered for income year. –Number of companies up 13.5% year-on-year. –Around 430 (23.9%) new customers. –More than 60 Advance/Overseas finding applications received to date. Programme Demographics (WA) source: Department of Industry and Science (income year , as at 31 December 2014) * for the R&D Tax Incentive, this includes R&D-performing subsidiaries of groups that are consolidated for tax purposes

Eligibility Criteria 1.Eligible entity. 2.Undertake eligible R&D activities. 3.Minimum $20,000 expenditure p.a. 4.Good planning and record keeping. R&D Tax Incentive

How does the R&D Tax Incentive work? R&D Tax Incentive

Specific issues Advanced Manufacturing Companies will need to consider All design and construction will involve some known engineering challenges that uses existing knowledge to solve a problem. Company will need to explain why it was not able to reply on existing knowledge and was required to undertake an experiment to generate new knowledge. Registration must be at R&D activity level and not at a project level.. R&D Tax Incentive

Specific issues Advanced Manufacturing Companies will need to Consider Research carried out under contract Applicant must hold the purpose of generating new knowledge. Purpose of generating new knowledge must be significant or substantial. Applicant must bear the financial risk of the R&D activities it conducts. Refer to JLSP versus Innovation Australia [2016] AATA January R&D Tax Incentive

AusIndustry Guidance Products - A Guide to Interpretation R&D Tax Incentive AusIndustry has recently released a new Guide to Interpretation. The Guide sets out how key elements of the definition of ‘R&D activities’ are interpreted. It is designed to assist companies of all sizes, across all sectors, to understand and assess whether their work is eligible for the R&D Tax Incentive.

Questions on: Registration & eligibility of R&D activities Questions on: Eligible entities & amounts you can claim Programme Administration